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Author: Mingming Wang Publisher: ISBN: Category : Electronic Dissertations Languages : en Pages : 168
Book Description
The concept of Constant Proportion Portfolio Insurance (CPPI) in terms of jump-diffusion, as well as the associated mean-variance hedging problem, has been studied. Three types of risk related to: the probability of loss, the expected loss, and the loss distribution are being analyzed. Both the discrete trading time case and the continuous trading time case have been studied. Next, CPPI with stochastic dynamic floors are being discussed. The concept of exponential proportion portfolio insurance is being introduced. Finally CPPI associated with the fractional Brownian market is being studied.
Author: Mingming Wang Publisher: ISBN: Category : Electronic Dissertations Languages : en Pages : 168
Book Description
The concept of Constant Proportion Portfolio Insurance (CPPI) in terms of jump-diffusion, as well as the associated mean-variance hedging problem, has been studied. Three types of risk related to: the probability of loss, the expected loss, and the loss distribution are being analyzed. Both the discrete trading time case and the continuous trading time case have been studied. Next, CPPI with stochastic dynamic floors are being discussed. The concept of exponential proportion portfolio insurance is being introduced. Finally CPPI associated with the fractional Brownian market is being studied.
Author: Raquel M. Gaspar Publisher: ISBN: Category : Languages : en Pages :
Book Description
This study aims to critically analyse design risk of constant proportion portfolio insurance (CPPI) structures, in the context of real life risky assets.It focus on the US stock market and consider daily returns on the S&P500, since it started to quote in 1957. Using bootstrapping techniques we are able to empirically simulate daily returns for the S&P500 -- the assumed underlying risky asset of portfolio insurance strategies.The empirical approach of this study is different from what has been done in the literature as we make no assumption on a particular model for the underlying risky asset dynamics, while most studies assume either a geometric brownian motion or a more general model that includes jumps. The results, are thus, model free and based upon real observed data.Based upon the empirical Monte Carlo simulation of the risky underlying asset, we can not only easily find the empirical payoff distribution of portfolio insurance strategies, but we are able to compute all relevant statistics, not only at maturity but also during the product's life span. Concretely, we look into CPPI strategies with different multipliers, but also into the classical option based portfolio insurance (OPBI) and some naive strategies such as the stop loss portfolio insurance (SLPI).A typical portfolio insurance strategy provides a capital guarantee F at maturity T and some possible participation in the upside potential of a risky underlying asset, if the underlying performs well.Thus, one expects its value to depend on: (i) F the level of capital guarantee, (ii) T the maturity, or (iii) the value at maturity of the underlying risky asset or, if path dependent, on its actual evolution. However in the case of CPPIs, the structure's performance depends strongly (iv) on the multiplier m; (v) the frequency of reallocation, (vi) any possible deductions from the investment (namely fees and/or coupons).We call the dependence of CPPI structures no these variables (iv)-(vi) which are unrelated to the underlying risky asset: design risk. Overall, this study strengths the ideia that CPPI strategies suffers from a serious design problem, making it uninteresting to almost all investors.
Author: Ralf Hohmann Publisher: Springer-Verlag ISBN: 3658221259 Category : Business & Economics Languages : de Pages : 63
Book Description
Dieses essential gibt einen Überblick zu aktuellen Erscheinungsformen der Portfolio Insurance sowie zur Anwendbarkeit der Constant-Proportion-Portfolio-Insurance mit vielfältigen Finanztiteln auf unterschiedlichen Geld- und Kapitalmärkten. Die empirische Untersuchung mit historischen Daten dazu umfasst einen Zeitraum von über sechs Jahren und ist in diesem Umfang ohne Vergleich. Die Darstellung und Vorgehensweise im Rahmen der Strategie erfolgt detailliert und wird mit Beispielen zur Replizierbarkeit unterstützt. Gleiches gilt für die empirischen Ergebnisse der unterschiedlichen Ergebnisse und der jeweiligen Finanztitel, die mit der Portfolio Insurance geschützt werden. Als Ergebnis wird deutlich, dass Transaktionskosten keinen wesentlichen Einfluss auf das Ergebnis der Strategien haben, negative Zinssätze jedoch den Erfolg maßgeblich negativ beeinflussen können.
Author: Cathrine Jessen Publisher: ISBN: Category : Languages : en Pages :
Book Description
A practical implementation of constant proportion portfolio insurance (CPPI) strategies must inevitably take market frictions into account. I study a CPPI in a setting with trading costs, fees and borrowing restrictions, and relax the assumption of continuous portfolio rebalancing. The main goals are to cover issuer's gap risk and to maximize CPPI performance according to investor's preferences over possible multipliers: the proportionality factor that determines the risky exposure of a CPPI. Investment objectives are described by the Sortino ratio and alternatively by an S-shaped utility function known from behavioral finance. Investors with either objective will choose a lower multiplier than if CPPI performance is measured by the expected return. Discrete-time trading requires a portfolio rebalancing rule, which affects both performance and gap risk. Two commonly applied strategies, rebalancing at equidistant time steps and rebalancing based on fixed market moves, are compared to a new rule, which takes trading costs into account. While the new and the market-based rules deliver similar CPPI performance, the new rebalancing rule achieves this by fewer trading interventions. Issuer's gap risk can be covered by a fee charge, by hedging or by an artificial floor. A new approach to determine the artificial floor is introduced. All three methods reduce losses from gap events effectively at only a small cost to the investor.
Author: Sandra Bacher Publisher: ISBN: Category : Languages : en Pages : 88
Book Description
Sowohl die Constant Proportion Portfolio Insurance (CPPI) als auch die Time Invariant Portfolio Protection (TIPP) sind die bekanntesten Beispiele für Portfolio Absicherungsstrategien ohne derivative Instrumente. Da beide Strategien bei Privatinvestoren breite Verwendung finden, ist es von besonderem Interesse durch Studien festzustellen, welche der beiden Strategien die erfolgversprechendere Variante darstellt. Dem kommt besonders in Zeiten fallender Aktienkurse, wie zum Beispiel während der Finanzkrise, erhöhte Bedeutung zu, da gerade zu solchen Zeiten Privatinvestoren eine Absicherung ihrer Postfolios anstreben. Um die Möglichkeiten der CPPI und der TIPP Strategien beurteilen zu können, werden sowohl empirische Untersuchungen durchgeführt als auch auf vorhandene Literatur zurückgegriffen. Der Erfolg der Strategien kann anhand der Ermittlung der Downside Risiken und anhand von Performance Kennzahlen beurteilt werden. Somit ist es auch möglich die Forschungsfrage zu beantworten. Die Ergebnisse zeigen, dass für Privatinvestoren die TIPP Strategie zu bevorzugen ist. Die TIPP Strategie entspricht dem Risikoprofil eines Privatinvestors besser und bietet darüber hinaus eine höhere Qualität der Absicherung.*****The constant proportion portfolio insurance (CPPI) as well as the time invariant portfolio protection (TIPP) are the most prominent examples of portfolio insurance strategies without derivatives. Since both strategies are widely used among private investors it is of particular interest to examine which of the two portfolio insurance strategies is the most promising strategy. This applies especially to periods characterized by falling equity markets like during the financial crisis when private investors specifically seek for protection of their portfolios. In order to investigate the potential of the CPPI and the TIPP strategy an empirical analysis as well as secondary research is used. By calculating downside risk and performance measures the success of the strategies can be examined and the research question can be answered. Results show that the TIPP strategy is favorable for private investors. Moreover the TIPP strategy better fits the risk profile of a private investor and offers higher quality of protection.
Author: Rama Cont Publisher: ISBN: Category : Languages : en Pages : 27
Book Description
Constant proportion portfolio insurance (CPPI) allows an investor to limit downside risk while retaining some upside potential by maintaining an exposure to risky assets equal to a constant multiple of the quot;cushion,quot; the difference between the current portfolio value and the guaranteed amount. Whereas in diffusion models with continuous trading, this strategy has no downside risk, in real markets this risk is non-negligible and grows with the multiplier value. We study the behavior of CPPI strategies in models where the price of the underlying portfolio may experience downward jumps. Our framework leads to analytically tractable expressions for the probability of hitting the floor, the expected loss and the distribution of losses. This allows to measure the gap risk but also leads to a criterion for adjusting the multiplier based on the investor's risk aversion. Finally, we study the problem of hedging the downside risk of a CPPI strategy using options. The results are applied to a jump-diffusion model with parameters estimated from returns series of various assets and indices.
Author: Mingming Wang
Author: Mingming Wang
Author: Giuseppe Corvino
Author: Koon-Kam Johney Lee
Author: Fischer Black
Author: Raquel M. Gaspar
Author: Ralf Hohmann
Author: Cathrine Jessen
Author: Sandra Bacher
Author: Rama Cont
Author: Geoffrey H. Kingston